As China Gas Crunch Grows, CNOOC Hires 100-Truck Convoy to Ship LNG to Icy North

China oil and gas major CNOOC has rented a convoy of 100 trucks to ship liquefied natural gas (LNG) the length of the country to wintry northern regions in the latest unusual, and costly, move to ease a deepening fuel crisis.

The trucks, kitted out to transport 20 tonnes apiece of super-chilled gas, are travelling thousands of kilometres from CNOOC’s main LNG receiving terminals in the south, such as the Zhuhai Jinwan and Yuedong stations in Guangdong province, CNOOC said in a statement on Friday.

Trucking LNG to industrial customers has taken off this year as China’s gas sector booms. But distances are typically much shorter, highlighting the extreme steps suppliers are having to take to plug shortages in the north, where Beijing’s efforts to convert homes to gas and electric heating from coal have fuelled surging demand.

A result of unprecedented government pressure to clean up the environment, the clamour for more gas has led to shutdowns at factories short of supply, even as residents across China’s industrial northern heartland freeze without fuel for their new heating systems.

“We hope to provide more LNG resources to north China with truck delivery,” CNOOC said in the statement, published by the state asset supervisor on Friday. Last week, CNOOC said it had leased two tankers to provide floating storage for LNG imports off China’s coast.

CNOOC didn’t say how much the truck convoy will cost. But China’s state majors are under political pressure to deal with supply problems stemming in part from inefficient pipeline links and storage tank capacity - there are no major pipelines connecting the north with the south.

Reuters calculations, based on the going rate of 1.05 yuan per tonne, per mile to transport gas by diesel truck, point to the firm being willing to soak up costs potentially running into millions of dollars.

Delivering LNG by diesel trucks travelling 2,400 kilometres from Zhuhai to Baoding, a major city in the northern Hebei province struggling with gas shortages, would take about two days and cost about 50,400 yuan ($76,267.72) - for the 20 tonnes per truck, Reuters calculations showed.

That’s almost a third of the value of a 20-tonne cargo of LNG cargo, based on offer prices of 9,000 yuan per tonne on Friday, trader sources said.

At the end of October, Xie Weizhi, CNOOC’s chief financial officer, lamented the fact that the company’s offshore gas fields in the south China Sea are not well-placed to meet surging gas demand in north China.

CNOOC’s LNG has to arrive in the south because it only has one terminal in the north - in Tianjin - and CNOOC says that’s already operating at full capacity.